Transactional and

Transformational
Leadership
Transactional leadership
 A transactional leader is one who guides and
motivates his followers in the direction of
established goals by clarifying role and task
requirements.

 Transactional leadership involves exchange

relationship between the leader and the followers
Characteristics of
transactional leaders
 Contigent reward- Contracts exchange of rewards for
effort, promises rewards for good performance,
recognizes accomplishments.

 Management by exception (active)- Watches and

searches for deviations from rules and standards, takes
corrective action.

 Management by exception (passive)- Intervenes only if

standards are not met.

 Laissez-faire- Abdicates responsibilities, avoids making

decisions
Contingent reward
 “If you do as we agreed…”

 This is the classic transactional style. The leader sets clear goals and
rewards accomplishment through a variety of ways. This means that their
employees perform up to the expected levels, but to get people to ‘go that
extra mile’ – a more transformational style is needed
MBE(active)
 “I am watching to see if you don’t …”

 In contrast the active MBE leader pays very close attention to any
problems and has extensive and accurate monitoring and control systems
to provide early warning of problems. This style tends to produce only
moderate performance.
MBE(passive)
 “If I happen to see that you didn’t… “

 Passive MBE leaders tend to be somewhat laissez-faire but take action

when problems occur or mistakes are made. They avoid unnecessary
change and only intervene when exceptional circumstances become
apparent.
 Transformational leadership

 A transformational leader is one who inspires organisation

success by pro­foundly affecting followers beliefs in what an
organisation should be, as well as their values, such as
justice and integrity

 This style provide individualized consideration and

intellectual stimulation to the followers to subordinate their
own self-interests for the good of the organisation.
 This style of leadership creates a sense of duty within
an organisation, encourages new ways of handling
problems, and promotes learning for alI organisation
members.

 Transformational leadership is closely related to

concepts like charismatic leadership and inspirational
leadership
Role of transformational leader
 They raise followers' awareness of organisational
issues and possible consequences.

 They create a vision of what the organisation should be

and build commitment to that vision throughout the
organisation.

 They facilitate organisational changes that support the

vision.

 They pay attention to the concerns and developmental

needs of the individual followers.
Characteristics of Transformational Leaders
 Charisma- Provides vision and sense of mission,
instills pride, gains respect and trust

 Inspiration- Communicates high expectations, uses

symbols to focus efforts, expresses important purposes
in simple ways

 Intellectual stimulation- Promotes intelligence,

rationality, and careful problem solving

 Individual consideration- Gives personal attention,

treats each employee individually, coaches, advises
Charisma
 “If you believe this is right, then…”

 Determined with a sense of purpose. A positive role model who

demonstrates out of the ordinary capability. Leaders like this are often
described as charismatic with a high degree of morality, trust and
integrity. They tend to address crisis ‘head on’ and celebrate success with
their people
Inspirational Motivation
 “If you try your best…”

 Willing to exert extra effort and good at convincing followers of their

abilities, this type of leader has the ability to motivate people to achieve
superior performance. They create a readiness for change and encourage a
broad range of interests.
  
Intellectual Stimulation
 “If you try another…”

 Intellectual stimulation allows the leader to encourage others to think

through issues and problems for themselves so that they develop their own
abilities. Frequently used by parents, this is a less common approach in
organisations.
Individualized Consideration
 “I care about your development and you as an individual…”

 Caring and empathetic and provides challenges and opportunities for

others. The IC type leader is an active listener and strong communicator.
This is the first of the transformational styles.
Primary Differences between Transformational & Transactional Leadership

Transformational Leader Transactional Leader

Builds & instills vision based on organizational values. Leadership act does not bind leader and followers
in mutual and continuing pursuit of a higher
purpose

Enjoys good relationships with subordinates

Leader contributes more

Employees exert greater efforts for leader

Leaders and followers raise one another to higher level

of motivation and morality
 Primary Differences between Transformational & Transactional Leadership
Categories Transactional Transformational

Leader’s source Rank, position Character, competence

of power

Follower reaction Compliance Commitment

Time frame Short term Long term

Rewards Pay, promotion, etc. Pride, self-esteem, etc.

Supervision Important Less important

Counseling focus Evaluation Development

Where change occurs Follower behavior Follower attitude, values

Where “leadership” found Leader’s behaviour Follower’s heart